2026 Review of Low-Income Countries Debt Sustainability Framework

Source details

Canonical URL: 2026 Review of Low-Income Countries Debt Sustainability Framework

The 2026 Low-Income Countries Debt Sustainability Framework (LIC-DSF) Review is a joint IMF–World Bank exercise that aims to future-proof the framework, ensuring it remains fit for purpose as debt risks, financing patterns, and analytical tools evolve.
The Debt Sustainability Framework for Low-Income Countries (LIC-DSF) is a joint analytical framework developed jointly by the International Monetary Fund (IMF) and the World Bank.
The LIC-DSF is used to analyze public debt stress and sustainability in countries eligible for concessional financing from either institution.
Since its introduction in 2005, the LIC-DSF has been the cornerstone of the international community’s assessment of risks to debt sustainability in LICs, with important operational implications for stakeholders.
Primary objectives:
- Support the IMF and World Bank policy advice and lending decisions.
- Help guide fiscal policies and public debt management in low-income countries, balancing the need to finance growth and development with keeping debt vulnerabilities in check.

The debt landscape since the 2017 reform has become more risky and complex for LICs at a time of:
- elevated development needs,
- falling official development assistance,
- rising borrowing costs.
Borrowing patterns have become more heterogeneous across the country grouping, with frontier and other relatively wealthier LICs making greater use of borrowing on commercial terms.
The 2026 LIC-DSF Review aims to ensure the framework remains fit for purpose as debt risks, financing patterns, and analytical tools continue to evolve.

The 2026 LIC-DSF review builds on the strength of the current framework and introduces upgrades in three key areas:

1. Refining measurement and thresholds

Brings greater rigor to the analysis of risks to debt sustainability by better differentiating between countries facing some risk of debt stress and countries whose debts are assessed as unsustainable.
Refines the measurement of countries’ debt-carrying capacity.
Recalibrates and expands the scope of the thresholds that signal debt stress.
Introduces new tools to assess debt sustainability.

2. Broadening the lens on debt risks

More systematically analyzes domestic debt vulnerabilities.
Better reflects long-term challenges.
Allows countries to better assess how much fiscal space might be available to support needed investment in development and climate adaptation efforts while containing debt vulnerabilities over the long term.
Provides a key tool to guide decision-making around investment and adaptation trade-offs.

3. Enhancing objectivity and data quality

Further develops the realism tools and stress tests that support the consistency and accuracy of forecasts.
Refines and streamlines the criteria for debt coverage.
Incentivizes countries to improve the quality, breadth, transparency, and reliability of public debt data used in the debt sustainability analyses.

The review emphasizes keeping the LIC-DSF:
- tractable and easy to use,
- more comprehensive,
- forward-looking,
- better aligned with the evolving challenges facing low-income countries.

Review of the Bank-Fund Debt Sustainability Framework for Low-Income Countries – Proposed Reforms
- The paper proposes a set of reforms to ensure that the IMF–World Bank LIC-DSF remains fit for purpose and future-proof in the face of heightened debt vulnerabilities, greater heterogeneity across LICs, and analytical advances since the 2017 Review.
Background Note on Engagement with External Stakeholders
- Provides details on the extensive engagement with a diverse array of external stakeholders undertaken by IMF and World Bank staff in the course of the Review of LIC-DSF.